ArcelorMittal Said to Cut Capacity at Indian Plant in Jharkhand and Orissa
2009 April 20 (Bloomberg) -- ArcelorMittal, the world's largest steelmaker, may cut the size of a planned steel plant in India by half and indefinitely defer a second facility as the global recession curbs sales of cars and homes, a company official said.
An investment committee will meet this week in Luxembourg to discuss building a 3 million-metric-ton factory in eastern India for 75 billion rupees ($1.5 billion), said the official, declining to be identified as the plan is confidential. The company, which had planned two plants with a starting capacity of 6 million tons each, will defer the investments by at least two years to 2014 and may cut the sizes, Vijay Kumar Bhatnagar, chief executive officer of the India unit, said on April 15.
Steelmakers are shelving new projects and cutting output as the global recession weakens international steel demand. Luxembourg-based ArcelorMittal said last week it will close a facility in Indiana that makes steel bars for the auto industry.
"Companies will continue to do the groundwork but will revive their projects only when the fortune of the industry changes," said Rakesh Arora, an analyst at Macquarie Group Ltd. in Mumbai. "Allocation of iron ore is the key to securing investment in the steel sector in India."
ArcelorMittal fell as much as 7 percent, the most since March 30, to 20.56 euros and traded at 20.58 euros at 12:19 p.m. in Amsterdam. The shares have risen 21 percent this year.
ArcelorMittal secured a permit to mine iron ore in the eastern Jharkhand state last year, almost three years after the company announced the $10 billion venture. The states of Jharkhand, Orissa and Chhattisgarh account for 70 percent of India's coal reserves and 55 percent of its iron ore, according to McKinsey & Co.
ArcelorMittal in October 2005 said it would set up a factory with a final capacity of 12 million tons in Jharkhand and announced another plant of the same size in neighboring Orissa the following year. There will be no change to final planned capacity, Bhatnagar said on April 15.
"ArcelorMittal remains committed to its greenfield projects in India," Lynn Robbroeckx, a spokeswoman for ArcelorMittal in London, said today by phone. "However, it is only prudent to ensure that the timing of this project is adapted to the current exceptional economic environment."
Robbroeckx was unable to confirm whether ArcelorMittal officials are meeting this week in Luxembourg to discuss the company's plan for India.
Like ArcelorMittal, plans by Posco, Asia's third-biggest steelmaker, to set up a factory in India have yet to take off. Land disputes and delays in allocating mining licenses have prevented the South Korean company from starting a 12 million ton steel plant in Orissa for the past two years.
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